Decision-Making Model in Managerial Accounting

The video tutorial explains a five-step decision-making model. It begins with identifying the decision, emphasizing the importance of understanding the true nature of the decision. The second step involves identifying alternatives, which can vary based on the decision's scope. The third step focuses on relevant costs and revenues, distinguishing between avoidable and unavoidable costs. The fourth step highlights the importance of qualitative issues, often overlooked in favor of quantitative analysis. Finally, the fifth step involves evaluating alternatives to choose the one with the greatest benefit or least cost.

Why is it crucial to correctly identify the decision you are trying to make?

• To ensure you have enough money

• To avoid making any decision at all

• To open up a wider range of alternatives

• To justify your personal preferences

What happens when you frame your decision as 'What type of transportation can I obtain to reliably get from point A to point B'?

• You limit your options to only cars

• You ignore all other forms of transportation

• You expand your options beyond just cars

• You focus only on the cost of cars

What is the significance of identifying relevant costs and revenues in decision-making?

• To only consider irrelevant costs

• To focus only on unavoidable costs

• To consider both avoidable and unavoidable costs

• To ignore all financial aspects

Why is it important to consider qualitative issues in decision-making?

• They are more important than quantitative issues

• They are irrelevant to the decision-making process

• They provide a financial perspective

• They offer insights beyond just numbers

What is the final step in the decision-making model?

• Identifying the decision

• Identifying alternatives

• Making the decision based on greatest benefit or least cost

• Considering only qualitative issues